08-01-2019, 03:45 PM
Dealers seek stable, liquid market
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Financial market dealers have said a stable and liquid money market is crucial to achieving market stability.
In a communique issued at the end of a seminar organised by the Financial Markets Dealers Association (FMDA) Money Market Workgroup, in Lagos, the dealers said the money market is the bedrock of banking and economic activities.
They also said monetary policy rate ought to be used as an effective anchor for the money market.
“The need for a more stable and predictable money market in Nigeria, developing framework, product, and layers that will allow its intermediary role as well as de-risking and improving perception of the banking industry is crucial in building confidence in the sector,” they said.
They also called for more market participation by the Central Bank of Nigeria (CBN) and proper credit instruments and products offering by financial institutions.
The dealers canvassed “a balancing mechanism to even out the demand for and supply of funds, private partnership legal framework for derelict infrastructure -power, rail, health, education, as well as encouraging collective will to leave everywhere we go a bit better than we met it”.
The seminar’s theme was: “Developing a vibrant and liquid money market as an effective catalyst to spur economic growth – Focus on the Interbank Market”.
The welcome address was delivered by CBN Director, Financial Markets Department, Mrs. Angela Sere-Ejembi, and the keynote speaker was the Managing Director/CEO, Citibank Nigeria, Akinsowon Dawodu, who shared perspectives on the Role of Money Market in Financial Market Development.
Other speakers were Managing Director/CEO, SunTrust Bank, Ayo Babatunde, who spoke on the “Balance Sheet, The Market and Optimal Impact”. Chairman, Money Market Workgroup Olufemi Adaramola gave an overview of the “Liquid Money Market with Impact on Derivatives Products Pricing and Development”.
In his presentation, Babatunde highlighted the challenges banks are facing, noting that the CBN policy, mandating banks to lend 60 per cent of their deposits by September 30, may push some of them to increase lending to high risk-borrowers with the potential of incurring heavy losses.
The guideline, he said, directed banks to improve lending to the real sector and maintain a minimum loan to deposit ratio (LDR) of 60 per cent (compared to the sector’s LDR of 58.5 per cent as at May and regulatory maximum of 80 per cent), subject to quarterly review.
To ensure lending to Small and Medium Enterprises (SMEs), retail, mortgage, and consumers, Babatunde said the CBN assigned a weight of 150 per cent to them in the computation of LDR.
“Failure to meet the minimum LDR of 60 per cent by the specified date will result in a levy of additional Cash Reserve Requirement (CRR) equal to 50 per cent of the lending shortfall of the target,” he said.
Babatunde said specific guidelines were required to clarify whether the LDR computation would be based on gross or net loan position.
The event attracted participants from both local and international banks, regulatory organisations, non-bank financial institutions, Small and Medium Scale Enterprises and other stake-holders.
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![[Image: financial-markets-report.jepg_-750x375.jpg]](https://thenationonlineng.net/wp-content/uploads/2019/07/financial-markets-report.jepg_.jpg)
[url=https://thenationonlineng.net/#facebook]
Financial market dealers have said a stable and liquid money market is crucial to achieving market stability.
In a communique issued at the end of a seminar organised by the Financial Markets Dealers Association (FMDA) Money Market Workgroup, in Lagos, the dealers said the money market is the bedrock of banking and economic activities.
They also said monetary policy rate ought to be used as an effective anchor for the money market.
“The need for a more stable and predictable money market in Nigeria, developing framework, product, and layers that will allow its intermediary role as well as de-risking and improving perception of the banking industry is crucial in building confidence in the sector,” they said.
They also called for more market participation by the Central Bank of Nigeria (CBN) and proper credit instruments and products offering by financial institutions.
The dealers canvassed “a balancing mechanism to even out the demand for and supply of funds, private partnership legal framework for derelict infrastructure -power, rail, health, education, as well as encouraging collective will to leave everywhere we go a bit better than we met it”.
The seminar’s theme was: “Developing a vibrant and liquid money market as an effective catalyst to spur economic growth – Focus on the Interbank Market”.
The welcome address was delivered by CBN Director, Financial Markets Department, Mrs. Angela Sere-Ejembi, and the keynote speaker was the Managing Director/CEO, Citibank Nigeria, Akinsowon Dawodu, who shared perspectives on the Role of Money Market in Financial Market Development.
Other speakers were Managing Director/CEO, SunTrust Bank, Ayo Babatunde, who spoke on the “Balance Sheet, The Market and Optimal Impact”. Chairman, Money Market Workgroup Olufemi Adaramola gave an overview of the “Liquid Money Market with Impact on Derivatives Products Pricing and Development”.
In his presentation, Babatunde highlighted the challenges banks are facing, noting that the CBN policy, mandating banks to lend 60 per cent of their deposits by September 30, may push some of them to increase lending to high risk-borrowers with the potential of incurring heavy losses.
The guideline, he said, directed banks to improve lending to the real sector and maintain a minimum loan to deposit ratio (LDR) of 60 per cent (compared to the sector’s LDR of 58.5 per cent as at May and regulatory maximum of 80 per cent), subject to quarterly review.
To ensure lending to Small and Medium Enterprises (SMEs), retail, mortgage, and consumers, Babatunde said the CBN assigned a weight of 150 per cent to them in the computation of LDR.
“Failure to meet the minimum LDR of 60 per cent by the specified date will result in a levy of additional Cash Reserve Requirement (CRR) equal to 50 per cent of the lending shortfall of the target,” he said.
Babatunde said specific guidelines were required to clarify whether the LDR computation would be based on gross or net loan position.
The event attracted participants from both local and international banks, regulatory organisations, non-bank financial institutions, Small and Medium Scale Enterprises and other stake-holders.